nep-eec New Economics Papers
on European Economics
Issue of 2011‒05‒24
nine papers chosen by
Giuseppe Marotta
University of Modena and Reggio Emilia

  1. Reinforcing EU Governance in Times of Crisis: The Commission Proposals and Beyond By Ansgar Belke
  2. The monetary transmission mechanism in the euro area: has it changed and why? By Martina Cecioni; Stefano Neri
  3. Housing, consumption and monetary policy: how different are the U.S. and the euro area? By Alberto Musso; Stefano Neri; Livio Stracca
  4. Forecasting aggregate and disaggregates with common features By Antoni, Espasa; Iván, Mayo
  5. Reaping the Benefits of Deeper Euro-Med Integration Through Trade Facilitation By Yves, Bourdet; Persson, Maria
  6. The impact of the global financial crisis on output performance across the European Union: vulnerability and resilience. By Karin Kondor; Karsten Staehr
  7. Coverage and adequacy of Minimum Income schemes in the European Union By Figari, Francesco; Haux, Tina; Matsaganis, Manos; Sutherland, Holly
  8. The Shadow Economy in OECD Countries: Panel-Data Evidence By Konstantin A. Kholodilin; Ulrich Thießen
  9. Funding in Public Sector Pension Plans: International Evidence By Eduard Ponds; Clara Severinson; Juan Yermo

  1. By: Ansgar Belke
    Abstract: The recent extensive package introduced by the Commission is the most comprehensive reinforcement of economic governance in the EU and the euro area since the launch of the Economic and Monetary Union. Broader and enhanced surveillance of fiscal policies, but also macroeconomic policies and structural reforms are sought in the light of the shortcomings of the existing legislation. New enforcement mechanisms are foreseen for non-compliant Member States. In this very crucial and important package of 6 legislative dossiers this paper tries to identify critical missing or redundant and/ or unworkable elements within the Commission package. Moreover, it checks what (if anything) is missing outside and beyond the proposals in order to make the whole package of governance reform complete and workable as, for instance, crisis resolution mechanisms and debt restructuring, EMF, project bonds and Eurobonds.
    Keywords: EU governance; European Council; European Financial Stability Facility; European Monetary Fund; policy coordination; scoreboard, Stability and Growth Pact
    JEL: E61 E62 P48
    Date: 2010–12
  2. By: Martina Cecioni (Bank of Italy); Stefano Neri (Bank of Italy)
    Abstract: Based on a structural VAR and a dynamic general equilibrium model, we provide evidence of the changes in the monetary transmission mechanism (MTM) in the European Monetary Union after the adoption of the common currency in 1999. The estimation of a Bayesian VAR over the periods before and after 1999 suggests that the effects of a monetary policy shock on output and prices have not significantly changed over time. We claim that this cannot be the final word on the evolution of the MTM as changes in the conduct of monetary policy and the structure of the economy may have offset each other giving rise to similar responses of output and inflation to monetary policy shocks between the two periods. The estimation of a DSGE model with several real and nominal frictions over the two sub-samples shows that monetary policy has become more effective in stabilizing the economy as the result of a decrease in the degree of nominal rigidities and a shift in monetary policy towards inflation stabilization.
    Keywords: monetary policy, transmission mechanism, Bayesian methods
    JEL: E32 E37 E52 E58
    Date: 2011–04
  3. By: Alberto Musso (European Central Bank); Stefano Neri (Banca d’Italia); Livio Stracca (European Central Bank)
    Abstract: This paper provides a systematic empirical analysis of the role of the housing market in the macroeconomy in the U.S. and the euro area. First, it establishes some stylised facts concerning key variables in the housing market on the two sides of the Atlantic, such as real house prices, residential investment and mortgage debt. It then presents evidence from Structural Vector Autoregressions (SVAR) by focusing on the effects of monetary policy, credit supply and housing demand shocks on the housing market and the broader economy. The analysis shows that similarities outweigh differences as far as the housing market is concerned. The empirical evidence suggests a stronger role for housing in the transmission of monetary policy shocks in the U.S. The evidence is less clear-cut for housing demand shocks. Finally, credit supply shocks seem to matter more in the euro area.
    Keywords: residential investment, house prices, credit, monetary policy
    JEL: E22 E44 E52
    Date: 2011–04
  4. By: Antoni, Espasa; Iván, Mayo
    Abstract: The paper is focused on providing joint consistent forecasts for an aggregate and all its components and in showing that this indirect forecast of the aggregate is at least as accurate as the direct one. The procedure developed in the paper is a disaggregated approach based on single-equation models for the components, which take into account common stable features which some components share between them. The procedure is applied to forecasting euro area, UK and US inflation and it is shown that its forecasts are significantly more accurate than the ones obtained by the direct forecast of the aggregate or by dynamic factor models. A by-product of the procedure is the classification of a large number of components by restrictions shared between them, which could be also useful in other respects, as the application of dynamic factors, the definition of intermediate aggregates or the formulation of models with unobserved components
    Keywords: Common trends, Common serial correlation, Inflation, Euro Area, UK, US, Cointegration, Single-equation econometric models
    Date: 2011–04
  5. By: Yves, Bourdet (Department of Economics, Lund University); Persson, Maria (Department of Economics, Lund University)
    Abstract: The current political turmoil in the Arab world has contributed to renewed interest in the Barcelona Process and how it can be improved in order to promote inclusive growth in the non-EU Mediterranean countries. In this paper, we explore whether deeper integration in the form of trade facilitation – i.e. improved and simplified trade procedures – could be an important part of a reform agenda. Adopting a Southern perspective by focusing on exports from non-EU Mediterranean countries to the EU, we use data from the World Bank’s Doing Business Database on the efficiency of trade procedures to formally test whether the efficiency of trade procedures affects (i) bilateral volumes of exports, and (ii) the number of products that are exported. We find that improving export and import procedures to the best practice levels (for each group of countries) is likely to increase the value of non-EU Mediterranean exports by 34% and to increase the number of products exported by non-EU Mediterranean countries by 21%. A main implication of the results is therefore that more efforts should to be devoted to trade facilitation in order to reap the benefits of deeper integration between the two groups of countries.
    Keywords: Barcelona Process; Mediterranean Union; European Union; Deeper Integration; Trade Facilitation; Export volumes; Export Diversification
    JEL: C23 F15 O24
    Date: 2011–04–28
  6. By: Karin Kondor; Karsten Staehr
    Abstract: This paper uses regression analyses to explain the different output performance in the 27 countries in the EU based on measures of their pre-existing vulnerability and resilience. Rapid financial deepening and high financial leverage, both domestically and externally, were followed by larger output losses during the crisis. The level of financial depth, on the other hand, did not affect output negatively. A large degree of trade openness was associated with weaker output performance, possibly because of falling export demand during the crisis. Finally, government deficits and debt stocks do not seem have impacted negatively on output. The Baltic States stand out as having much explanatory power in the sample due to their large output losses during the crisis.
    Keywords: global financial crisis, contagion, business cycles, GDP
    JEL: E32 F4
    Date: 2011–05–13
  7. By: Figari, Francesco; Haux, Tina; Matsaganis, Manos; Sutherland, Holly
    Abstract: The purpose of this paper is to explore and compare the effectiveness of Minimum Income (MI) schemes in protecting people of working age from poverty in the European Union. Using the EU-wide microsimulation model EUROMOD, we investigate (a) coverage and (b) adequacy of MI schemes in 18 countries. In contrast to previous comparative studies of MI benefits, relying on comparisons of the effects on stylised families, we are able to capture the full range of individual and household circumstances and to quantify the effects on people entitled to MI schemes using a comparable approach across countries.
    Date: 2010–11–23
  8. By: Konstantin A. Kholodilin; Ulrich Thießen
    Abstract: In this paper, the extent of the shadow economy in OECD countries is investigated. The estimates of the size of the shadow economy are obtained using the panel-data techniques applied to the data on 38 OECD member states over the period 1991-2007. Our estimates tend to be somewhat lower than the alternative estimates. However, our and alternative estimates of shadow economy are quite well correlated - the corresponding correlation coefficients lie between 0.63 and 0.65. The only exception is our estimates for 2002 and those of Schneider et al. (2010) for 2002, for which a low correlation is observed. We find that the estimates of the size of the shadow economy are very sensitive to the assumption on the velocity of money circulation. It is shown that the micro- and macro-evidence are consistent at a relatively low velocity of money circulation.
    Keywords: shadow economy, OECD countries, panel-data estimation
    JEL: C51 E26
    Date: 2011
  9. By: Eduard Ponds; Clara Severinson; Juan Yermo
    Abstract: Most countries have separate pension plan for public sector employees. The future fiscal burden of these plans can be substantial as the government usually is the largest employer, pension promises in the public sector tend to be relatively generous, and future payments have to be paid out directly from government revenues (pay-as-you-go) or by funded plans (pension funds) which tend to be underfunded. The valuation and disclosure of these promises in some countries lacks transparency, which may be hiding potentially huge fiscal liabilities that are being passed on to future generations of workers.<p> In order to arrive at a fair comparison between countries regarding the fiscal burden of their DB public sector pension plans, this paper gathers more evidence on public sector pension plans regarding the type of pension promise and quantifies the future tax burden related to these pension promises. The reported liabilities are recalculated using both a fair value approach (local market discount rates) and a common, fixed discount rate across all countries which reflects projected growth in national income. We also estimate for a number of plans from a sample of OECD countries the size of the net unfunded liabilities in fair value terms as of the end of 2008. This fiscal burden can also be interpreted as the implicit pension debt in fair value terms.
    Keywords: pension fund, funding, defined benefit, fair value, hybrid plans, public sector pensions, actuarial evaluation
    JEL: G23 H55 H75 H83 J32
    Date: 2011–05

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